Correlation Between Ford and SeaBird Exploration
Can any of the company-specific risk be diversified away by investing in both Ford and SeaBird Exploration at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ford and SeaBird Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and SeaBird Exploration Plc, you can compare the effects of market volatilities on Ford and SeaBird Exploration and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ford with a short position of SeaBird Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and SeaBird Exploration.
Diversification Opportunities for Ford and SeaBird Exploration
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and SeaBird is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and SeaBird Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SeaBird Exploration Plc and Ford is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ford Motor are associated (or correlated) with SeaBird Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SeaBird Exploration Plc has no effect on the direction of Ford i.e., Ford and SeaBird Exploration go up and down completely randomly.
Pair Corralation between Ford and SeaBird Exploration
Taking into account the 90-day investment horizon Ford is expected to generate 3.5 times less return on investment than SeaBird Exploration. In addition to that, Ford is 1.34 times more volatile than SeaBird Exploration Plc. It trades about 0.03 of its total potential returns per unit of risk. SeaBird Exploration Plc is currently generating about 0.15 per unit of volatility. If you would invest 502.00 in SeaBird Exploration Plc on September 2, 2024 and sell it today you would earn a total of 74.00 from holding SeaBird Exploration Plc or generate 14.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.97% |
| Values | Daily Returns |
Ford Motor vs. SeaBird Exploration Plc
Performance |
| Timeline |
| Ford Motor |
| SeaBird Exploration Plc |
Ford and SeaBird Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and SeaBird Exploration
The main advantage of trading using opposite Ford and SeaBird Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, SeaBird Exploration can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SeaBird Exploration will offset losses from the drop in SeaBird Exploration's long position.The idea behind Ford Motor and SeaBird Exploration Plc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| SeaBird Exploration vs. Aker ASA | SeaBird Exploration vs. Subsea 7 SA | SeaBird Exploration vs. TGS NOPEC Geophysical | SeaBird Exploration vs. BW Offshore |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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